Are Extended Warranties Ever Worth the Price?
It seems that with just about any high-dollar purchase, as well as many moderately priced items today, we are asked to purchase extended warranty coverage. In fact, in some cases, the salesperson who sold us the item can just about have us convinced that the item is likely to break at approximately the same time that the manufacturer’s warranty runs out. Yet, although many of the extended warranties that are offered provide easy to repair or replace options, are they really worth the price? The answer to that question is that…it depends.
Review the Item’s Maintenance History
One of the factors to consider when deciding to purchase an extended warranty is the history of repairs that other customers have had to make on the same item. This information is easy to obtain online by going to any number of product review websites.
This is a great way to get a feel for whether or not the item you are considering purchasing has a good or bad reputation for working correctly. One thing to keep in mind, however, is that even if an item has great reviews, there is always the possibility of purchasing a “lemon.”
Consider How Long You Plan to Own the Item
Another factor in your decision to purchase an extended warranty is how long you plan to keep the item. If, for example, you only plan to use it for a short period of time, then it may be worthwhile to take your chances with just the manufacturer’s warranty on the product. On the other hand, if you are buying something you plan to use regularly for the long term, then the extended coverage may be worth the extra cost.
What Type of Protection is Really Being Offered?
Extended warranties are essentially insurance policies. Therefore, many of these plans require similar rules that are often found in other types of coverage such as the payment of a deductible or co-insurance.
Based on this, some questions you should ask prior to purchasing an extended warranty should include:
•Are there any deductibles or copayments that need to be paid prior to obtaining the coverage or reimbursement promised in the extended warranty policy?
•If there is a deductible required, will it need to be paid every time that the item breaks, or only the first time?
•Is there any type of waiting period or minimum ownership time frame in which you have to own the item before coverage will become effective?
Consider the Price of the Item Versus the Cost of the Warranty
One of the biggest criteria that should help you in determining whether or not to purchase extended warranty coverage is the price of the item itself. For instance, if you are purchasing a small electronics item that costs under $100, then it may be worth it to take your chances and forgo the extra coverage. However, if you are purchasing a pre-owned automobile for several thousand dollars, then the purchase of an extended warranty may be well worth the price as it can provide you with both the coverage and the peace of mind in knowing that you won’t need to fund all of the costs of potentially expensive repairs.